Ruling clears up keyword confusion
Though advertisers need to tread carefully when bidding on competitors’ trademarks as Google Adwords
INCOCHRANE Steel Products v MSystems Group (ZASGHC 29/10/ 14) the applicant sought an interdict against M-Systems for bidding on its brand name, ClearVu, as a Google Adwords search keyword.
The applicant did not have a trademark registration for its mark and accordingly relied on unlawful competition. Specifically, it alleged passing off and a new species of unlawful competition, leaning on.
Judgment was delivered by Judge Nicholls on October 29 2014. This case is open for leave to appeal, but at the time of writing no such application has been filed.
One of the complaints related to the bidding on the keyword ClearVu which generated an advert containing a link to the respondent’s website. This advert did not make any use of the mark ClearVu in its text.
The court considered whether the common law should be developed to recognise “leaning on” and whether the applicant had established the requisite confusion or deception necessary for passing off. As a result of its answers to these issues the court declined to decide whether the applicant had established a reputation in ClearVu.
In considering whether the common law should be extended to include leaning on, the court noted that South African law is generally opposed to monopolies not specifically provided by statute and that generally use of a name, where there is not likelihood of confusion, is not prohibited. The court drew specific attention to the fact that the broad area of unlawful competition was not intended to provide a remedy to a litigant who falls short of the requirements for passing off.
The court concluded that leaning on, as proposed by the applicant, was not unknown to our courts and that it has, in fact, been considered (albeit under different descriptions) and rejected, often with criticism of the practice of relying on this doctrine.
The court also noted that passing off (and the common law in general) protects goodwill, not a trademark, per se and on this basis concluded that pass- ing off and other common law remedies do not provide protection against dilution. Such protection, according to the decision, is to be found under the Trade Marks Act, 1993.
The court made extensive reference to foreign cases relating to Google Adwords. It noted that where a court accepts a likelihood of confusion, this must be done in light of the specific facts of that case.
The court confirmed that the test for confusion applied in the foreign cases, which is that confusion will only be likely if, in light of the text of the advertisement, a reasonably well informed internet user cannot determine if the goods advertised originate from the brand owner or its competitor. It also took cognisance of the trend in foreign cases which holds that where an advertisement triggered by a sponsored link promotes alternative goods which are not simply imitations, this is likely to be fair competition. The court noted internet users are accustomed to sponsored advertisements and the need to filter their search results.
Judge Nicholls concluded that consumers exposed to the respondent’s advertisements were highly unlikely to be confused or deceived into believing that the goods advertised were those of the applicant, particularly in light of the multiplicity of suppliers whose websites were returned in search results. The court mentioned that this was particularly the case where the text of the advertisement itself did not make use of the mark concerned. Accordingly it rejected the applicant’s claim on the basis of passing off, and dismissed the application. The court did note that this case specifically related to a claim in the absence of a registered trademark, which differs from the majority of the foreign cases. However, it pointed out that even a claim on the basis of a registered trademark would succeed only if confusion could be shown.
In the context of the judgment, this should not be read to limit the ability to bring such claim on the basis of dilution or unfair advantage in terms section 34(1)(c) as this remedy is recognised elsewhere in the decision, but rather a comment on the likely requirements for a claim for direct infringement on the basis of sections 34(1)(a) and (b).
This decision has brought much- needed clarity to the legal position surrounding the practice of bidding on competitor keywords. It has confirmed that such conduct should conform with the general approach to passing off and trademark infringement, which is that the core test is whether a likelihood of confusion exists. It establishes that the presence or absence of this must be evaluated on the basis of the advertisement itself and the goods advertised (in the context of appropriate surrounding circumstances) and that this is not altered by the fact that the advertisement is generated by the use of a keyword bidding service.
It indicates that advertisers who wish to bid on competitors’ trademarks as keywords may do so, provided they are careful to ensure these advertisements are clear and not confusing or otherwise do not take unfair advantage of the advertising value of a registered trademark. Traders will need to adapt their marketing and brand protection strategies to ensure they adequately deal with the risks such practices pose to their brands and market share.
The authors acted for M-Systems.